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Uganda offers government bonds to mobile money users

A Safaricom employee displays the M-Pesa money transfer service on a smartphone inside a mobile phone care centre in Nairobi on 22 November 2018.
A Safaricom employee displays the M-Pesa money transfer service on a smartphone inside a mobile phone care centre in Nairobi on 22 November 2018. Photo: Simon Maina/AFP

Ugandan authorities are set to open up the country’s market in government debt to users of mobile money. The cabinet’s decision on Monday hopes to encourage more saving and investment among Ugandans as well as broadening the scope of ways in which the government can raise money.


The initiative aims to enable Ugandans to use their mobile money wallets to directly purchase government securities – “effectively enhancing financial inclusion and economic growth,” according to a statement.

The government hopes more Ugandans will invest in the sovereign debt and it will reach the “individual retail investor especially those in rural areas”, the cabinet statement said.

The advantages for the government include the ability to widen the scope of bond sales beyond “commercial banks, offshore players and institutional investors”, the statement added, referring to the limited choice this currently gives the country’s authorities.

Using mobile money will mean retail investors will not have to physically make bids for bonds at their bank branches and instead simply transfer funds from their mobile money wallets.

It is hoped that the move will have an overall impact on economic growth in Uganda given that government debt is used as collateral for loans. By selling more sovereign debt to retail investors, the government hopes that it will “enhance” the private sector.

The two largest mobile network operators are likely to benefit from the government’s decision. South Africa’s MTN and India’s Airtel are the most popular networks in Uganda and both operate mobile money services.

Lessons learnt in Kenya?

Kenya in 2017 became the first country in the world to exclusively offer government bonds to retail investors through mobile money for as little as 26 euros.

M-Akiba is designed to help Kenyans save money and the proceeds are used for the “funding of government infrastructural development projects, both new and on-going”.

Kenya’s first M-Akiba sale was fully subscribed and raised 1.3 million euros. However, a more ambitious offering of more than 42 million euros was under-subscribed raising just 2.2 million euros, prompting the government to announce that it would “fine-tune” the process.

Kenya is expected to offer another M-Akiba sale before June offering an interest rate of 10 percent annually.

“The product was fairly successful in bringing a new broad-based retail investor group into the market for government paper,” said a report by FSD Africa, a financial sector development programme funded by the UK government.

The report analysing the uptake of M-Akiba concluded that 85 percent of customers had never bought a bond before and 84 percent really liked the product.

But the implementation of M-Akiba was marked by poor timing, poor understanding of the product and confusing purchase process, according to FSD Africa.

Nevertheless, M-Akiba stands out as the first government security to be sold through mobile money on the Africa continent and there are “significant opportunities to enhance the product in Kenya and replicate elsewhere”, said the FSD Africa report.

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